Buying Next Spring? Avoid Last-Minute Shocks

Once upon a time, in a very different real estate environment, buyers would find their new home, negotiate a contract, and finally, talk to a lender about getting a mortgage. Those days are gone forever, or at least for a long, long time.

With the competitive market in the Greater Nashville area, sellers will not wait for a buyer to find financing. That means holding their property in limbo, possibly missing other well-qualified and ready buyers. A listing agent who would advise their seller to enter into such an arrangement, unless there are unusual circumstances, would be guilty of malpractice.

The time to think about your credit is when you start thinking about buying a house. “But I’m thinking two or three years from now,” you say. Great. Congratulations. You have plenty of time to knock the dents out of that credit report, polish it and make it shine so bright that it outshines the smile on your loan officer’s face.

What to know about Credit

Credit is tricky. Most buyers seem to have issues to resolve. It doesn’t mean you have done anything wrong. It doesn’t mean you have been careless. Those things are just lying there, waiting to cause you to miss getting the house of your dreams or to cause a delay that will push your closing two weeks beyond your contract closing date.

What do these dings in a credit report look like? It may be something totally not yours. Credit reporting agencies make mistakes, a lot of mistakes. A similar name, a typo in a social security number, an endless number of possible human and machine errors can put an erroneous entry on your credit report. It’s just patiently waiting to surprise you at the most inopportune time.

Or, there was that time you left Seattle and moved to Austin before you moved to Nashville (in your search for the perfect job in the perfect trendy city). You decided to cancel your cell phone service that you had in Seattle because you found a ­­­­really great deal with another company in Austin two months before you moved to Nashville. You were sure you had paid everything you owed to that Seattle company, but they didn’t think so and sent a bill to the Austin address which didn’t get forwarded to Nashville. So, why try to track you down. Just put it on your credit report and wait.

Those innocent problems can take a couple of months to resolve. And then there are the nasty credit troubles from past days (years?) of youth and casual irresponsibility that just haven’t disappeared from your credit report as completely as they disappeared from your memory. All of this takes planning and work to resolve—the sooner, the better, but definitely before going house-hunting.

Independent, determined and resourceful as you may be, ultimately, this is not a job to take on by yourself. There are 49 different ways credit reporting agencies figure credit scores for different purposes. That’s why you can do a self-check on the internet; then have a mortgage loan officer get a different score. A good mortgage loan officer will be glad to work with you well before you are ready to buy. If not, you haven’t found the right loan officer. We are glad to suggest loan officers with whom we have had good experiences; just ask.

What else can you work on beginning today? Pay down your debt, credit cards, car payment, etc. Check your credit cards. What is your credit limit on each? Get your balance to no more than 30% of your limit; 15% is even better. Use your loan officer’s guidance to determine if you should use cash on hand to pay down credit cards rather than saving all of it for a down payment.

Finally, do no harm. Be strict about making rent and credit card payments on time. Avoid applying for any new credit. Even if you end up not buying that new car, a credit inquiry by the dealership can show a hard inquiry on your credit report.